[aleyan]

> > How is that helping anyone but the dealerships? > It's not.

That was my initial though as well, but I came up with at least one case where survival of the dealerships is critical to an open market place.

If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers. Not only do new entrants have to build a car company, but now they have to create a new distribution network as well at the same time.

That said, Tesla is a new car company and creating a new distribution network for them does not seem that big an issue.

[travisp]

>If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers.

Is that a barrier to Tesla? It appears a big potential barrier to Tesla (a new automaker) is in fact the dealerships and the law preventing manufacturers from selling directly. In this case it's helping to prevent new entrants into the industry.

[tomrod]

How would vertical integration between car manufacturers and dealerships be a barrier to entry specifically, given today's tech? I think there would be new car entrants doing what Tesla is doing.

[jmaygarden]

Then shouldn't the law simply ban such pricing practices? That seems like a less oppressive solution. Banning an important industry from selling its own products just sounds wrong.

[tomrod]

It's not my area of expertise. But there have been lawsuits against vertical exclusivity in car dealership. These slides seem to go into it:

http://www.justice.gov/atr/public/hearings/single_firm/docs/...